Exam 10: Property Dispositions

Taxpayers can recognize a taxable gain even though an asset's real economic value has declined.

Residential real property is not like-kind with non-residential real property.

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

Reid had a business building destroyed in a fire. The old building was purchased for $375,000 and $60,000 of depreciation deductions had been taken. Although the old building had a fair market value of $425,000 at the time of the fire, his insurance proceeds were limited to $400,000. Reid found qualified replacement property which he acquired six months later for $390,000. What is the amount of Reid's realized gain and recognized gain?

Which of the following is true regarding disallowed losses between related taxpayers?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accounts receivable and inventory are examples of ordinary assets.

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Which of the following is not an involuntary conversion?

Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets: Asset Original Cost Accumulated Depreciation Gain/Loss Machinery \ 12,000 \ 7,000 \ 6,000 Furniture 10,000 2,000 (3,000) Building 90,000 20,000 15,000 Assuming Suzanne's marginal ordinary income tax rate is 35 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

Collins Corporation, of Camden, Maine, wants to exchange its manufacturing equipment for Rockland Company's equipment. Both parties agree that Collins's machinery is worth $200,000 and that Rockland's machinery is worth $175,000. Collins will not enter into the transaction unless it qualifies as a like-kind exchange. If Collins wants to avoid gain, what could the parties do to equalize the value exchanged but still allow the exchange to qualify as a like-kind exchange?

Which of the following is not true regarding §1239?

Which one of the following is not true regarding a like-kind exchange?

How long does a taxpayer have to identify replacement property in a like-kind exchange?

Manassas purchased a computer several years ago for $2,200. On November 10th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

Pelosi Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Pelosi received $150,000 in cash in the current year and a note providing Pelosi with $150,000 in the subsequent year. What is Pelosi's recognized gain in the current and subsequent year, respectively?

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Which of the following is not true regarding installment sales?

Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?